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21 January 2011

Icahn/Lions Gate Hostile Takeover Listed as one of Lexpert’s Un-Deals of the Year

Lexpert has listed the attempted hostile takeover of Lions Gate Entertainment by the Icahn Group as one of its Top 3 Canadian “Un-Deals of the Year”.

The list, which refers to deals which didn’t close, is run as a complement to the Lexpert Top 10 Corporate Deals of the Year. Lexpert states that the 2010 Un-Deals “made history, and radically altered the way M&A in Canada – especially hostile M&A – will be done in 2011 and beyond.”

A Farris litigation team comprising Senior Partner, Robert Anderson, Q.C. and securities litigator Teresa Tomchak were co-counsel to the Icahn Group. The Icahn Group made an offer to acquire all of the common shares of Lions Gate and applied for an order cease-trading a shareholder rights plan adopted by the Lions Gate Board of Directors. The British Columbia Securities Commission granted the order on April 27, 2010. Lions Gate appealed the Commission’s decision. The Court of Appeal ruled that the Commission’s decision was not unreasonable and dismissed the Appeal on May 7, 2010. The Icahn Group sought a second order cease trading any securities issued in regards to a further poison pill adopted by the Board of Directors of Lions Gate on July 1, 2010. On November 18, 2010 the Commission cease traded the second poison pill. 

Although successfully having the poison pills cease traded, the Icahn Group did not take up any shares tendered under its second take-over bid and let the bid expire after the Courts refused to unwind certain transactions which occurred on July 20, 2010 in which Lions Gate exchanged approximately $100 million in convertible notes held by Kornitzer Capital Management Inc. for new notes with immediate conversion rights which were immediately sold to an investment fund controlled by Mark Rachesky, a director of Lions Gate. Rachesky’s investment fund immediately exercised its right to convert thereby increasing its shareholdings in Lions Gate from approximately 19 to 29%. An appeal of the decision of the British Columbia Supreme Court denying the relief sought in the oppression petition is scheduled to be heard on March 24, 2011. 

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